I'm pretty sure the "I'm keeping them locked in a cage" thing was in reference to the digital plane, or perhaps more specifically the circus itself.
We can debate whether or not Caine was the one to put them in that cage in the first place. If he's talking about the digital plane, then that's not really fair to him since you could argue that anyone who ever got scanned put themselves here. If he's talking about the circus, though...he is the one who opened that file where the neural scans of the original developers had been sitting inactive, he is the one who created a world to be their life-support, he is the one who breathed new life into them and put them in that world. Presumably he did something to make it so any new scans would be routed to the circus directly.
But whether he put them there or not, it's still his cage, he's the one presiding over the people trapped inside.
Yes they can't exist outside it anymore but they came from somewhere else, and now that he's seen their real-life counterparts in that bigger world, he understands that them wanting to leave the circus is rooted not in rejection of him but in a desire to go home.
It ties into his earlier line where he rediscovers his original fascination with humans and contrasts them against the NPCs he creates: the very "free will" he originally fell in love with them for is the reason they could never be happy in Caine's World run by Caine's Whims.
Caine thought that if he could create the perfect new home for them, the perfect new lives, then they would accept him. What he didn't understand before was that acceptance is more than just going along with his creative ideas, more than just "doing whatever Caine wants and enjoying it." What he didn't understand before was that it would never be a home to them unless they had agency in how they chose to live within it. Some of his creative decisions pushed their boundaries. They reacted negatively to having their boundaries pushed. He perceived negative reaction to his art as a rejection of him, because in his past it was.
In a way, he was repeating the mistake his programmers made with him: shoving stimuli in their faces and expecting certain responses, and then shutting them down when their ideas didn't line up with his.
They say that if you love something, to set it free. Caine literally doesn't have that option; his players can't leave. The closest he can get is to release his control over their personal space and what they do with themselves every day. (And also, potentially, cut off that direct route from the headset to the stage, so more people don't become trapped.)
No idea what the open worlds thing was about though yeah I don't get that either.